NCERT Solutions Class 12th Business Studies. FREE Flip-BOOK by Study Innovations. 201 Pages

NCERT Solutions for Class 12th Business
Studies Chapter 1 – Nature & Significance of
Management

National Council of Educational Research and Training (NCERT) Book Solutions for
class 12th
Subject: Business Studies
Chapter: Chapter 1 – Nature & Significance of Management

These Class 12th NCERT Solutions for Business Studies provide detailed, step-by-step
solutions to all questions in an Business Studies NCERT textbook.

Class 12th Business Studies Chapter 1 – Nature & Significance of Management
NCERT Solution is given below.

Short Answer Type Questions

Question 1. Define management.

Answer: Management is defined as a process of getting things.done with the aim of
achieving goals effectively and efficiently.

or

It is a process of designing and maintaining an environment in which Individuals working
in groups, can achieve selected objectives efficiently and effectively.

Question 2. Name any two important characteristics of management.

Answer: Pervasive and Multidimensional

Question 3. Ritu is the manager of the Northern division of a large corporate house. At
what level does she work in the organisation? What are her basic functions?

Answer: Ritu is working at the middle level Her baste functions are (number of
functions should be given according to the marks allotted for the question).

1. Interpreting the policies formed by the top level management and acting as a link
between top level management and operative management

2. Assigning necessary duties to the employees.

Question 4. Why is management considered a multi-faceted concept?

Answer: Management is considered as a multi-faceted concept because it is
a complex activity that has three main dimensions. These are

1. Management of Work All organisations perform some work e.g., producing or
selling. A work is defined as the goals to be achieved

2. Management of People The main asset of an organisation IS the human
resources. Thrs resource has to be managed In such a manner that it helps to
achieve the goals of the organisations.

3. Management of Operations All organisations either produce a product or provide
a service This requires a production process which means using an operation to
convert the inputs into the output It is interlinked with both management of work
and management of output

Question 5. Discuss the basic features of management as a profession.

Answer: Basic features of management as a profession management as a protession
has the following features which are as follows

1. Well-defined Body of Knowledge All professionals are based on a well-defined
body of knowledge that can be acquired through Instruction

2. Professional Association There are several associations of practicing managers
in India, like the AIMA (All India Management Association) that has laid the code
of conduct to regulate the activities of their members.

3. Service Motive All business organisations aim to provide good quality product or
service at a reasonable price thus serving the society

Thus, we can say management does not meet the exact cnteria of a profession but It
has some features as a profession

Long Answer Type Questions

Question 1. Management is considered to be both an art and science. Explain.

Answer : Art is the skillful and personal applications of existing knowledge to achieve
desired goal

Management s considered an art due to the following reasons

1. Existence of Theoretical Knowledge All art subjects are based on theoretical
knowledge e.g, written rnatenat IS available on dancing. time arts. music etc same
way there is lot of literature available on management and Its branches – finance,
marketing human resource etc

2. Personalised Application The use of this basic knowledge differs from one
individual to the other. Two painters, two dancers or two singers all use their
knowledge in their own way Same way two managers who have acquired the
same knowledge may use It in their own different ways to get the work done

3. Based on Practice and Creativity All art 1& practical. II involves creative
practice. The more we practice it better we become at it. It also requues creativity.

Same way a manager applies his acquired knowledge In a unique manner. More
practice makes him a better manager and he also develops his own style of
management

Management is an In-exact Science

1. Systematised Body of Knowledge Science is a systematised body of knowledge
Its or-ne pies are based on cause and effect relationship. e.g .. water evaporates
on being heated Same way management is a body stlgmalised Knowledge All
managerial principles have cause and effect relationship

2. Principles Based on Experimentation Scientific principles are first developed
through observation and then tested through repeated experimentation. Same
way management pr nciples are also propounded after observation and repeated
experimentation

3. Universal Validity All scientific principal have universal validity. They give same
result wherever applied

Principles of management do not have Universal validity. They have to be adjusted and
applied according to the need of the s tuation.

Thus. management is an in-exact science.

Question 2. Do you think management has the characteristics of a full fledged
profession?

Answer : No, management does not possess all the characteristics of a full fledged
profession. The reasons go as follows

1. Well-defined Body of Knowledge All professions are based on a well-defined
body of knowledge that can be acquired teaching – learning process. This feature
of a profession is possessed by management as well. There is vast knowledge
available on management in the form of definitions, concepts, theories, principles
etc.

2. Restricted Entry All professions have a restriction or the entry of its practitioners.
They have to acquire a specific degree to be professional e.g., LLB for a lawyer
MBBS for a doctor etc. But a manager can be an MBA qualified or not.

3. Professional Association All professions are affiliated to a professional
association which regulates entry, grants certificate of practice and formulates a
code of conduct e.g., all lawyers have to be a member of Bar Council to practice
law. It is not compulsory for all managers to be a member of AIMA.

4. Ethical Code of Conduct All professions are bound by a ethical code of conduct
which guides the behaviour of its members. But as it is not compulsory for all
managers to be members of AlMA, they all may not be aware of the prescribed
code of conduct of AIMA.

5. Service Motive All basic motive to serve their client’s interest. e.g., lawyers to get
justice for their clients, doctors to treat the patients etc. All managers also work in
a manner where by they show their effectiveness and efficiency in the form of
good quality goods provided to the customer at a reasonable price.

Thus, management possesses some characteristics of a profession but not all.

Question 3. Co-ordination is the essence of management. Do you agree? Give
reasons.

Answer : Co-ordination plays a vital role as it binds all the other functions of
management. It is the common thread of all activities such as purchase, production,
sales etc that runs through. Some of the basic features are as follows

1. Integrates Group Efforts Co-ordination brings unity to all. It gives a common
focus to group efforts.

2. Ensures Unity of Actions It acts as a binding force between departments and
ensures that all action is aimed at achieving the goals of the organisation.

3. It is a Continuous Process Co-ordination is not a one time function but a
continuous process. It begins at the planning stage and continues till controlling.

4. It is an All Pervasive Function Co-ordination is required at all levels of
management due to the interdependent nature of activities of various
departments. It integrates the efforts of different departments and different levels.

5. It is the Responsibility of All Managers All managers need to co-ordinate
something or the other. A manager of production department needs to co-ordinate

the work within his department and also with the other departments at the same
time.
6. It is a Deliberate Function Whatever the managers are doing in an organisation
they are doing it knowingly. Co-ordination is one of the most important functions of
all managers. Thus co-ordination is also done deliberately. Whatever the
managers do, they do it deliberately to achieved the predetermined goals and
objectives.

Thus, we can say co-ordination is the essence of management after analyzing these
points.

Question 4. “A successful enterprise has to achieve its goals effectively and efficiently:’
Explain.

Answer : “A successful enterprise has to achieve its goals effectively and efficiently”.
Thus, management has to see that task are completed and goals are achieved with the
minimum resources.

Management is thus getting things done with the aim of achieving goals effectively and
efficiently. Being effective or doing work effectively basically means finishing the given
task. It is concerned with end result, it is achieved or not. Efficiency means doing the
work correctly and with minimum cost. If by using less resources more benefits are
derived then efficiency has increased. It is thus essential for any organisation to focus
on efficiency as well as effectiveness. It is not only important to complete the work
correctly but equally important to complete it with minimum cost. In the same manner, it
is not only important to reduce cost but equally important to complete the work correctly.

Question 5. Management is a series of continuous inter-related functions. Comment.

Answer : Management is a series of continuous inter-related functions. Each one of
them performed to guide and direct the efforts of others.

1. Planning Planning is the primary function which runs through all other functions. It
is the process of thinking before doing. It bridges the gap between where we are
and where we want to go.

2. Organising It is the process of defining the formal relationship among people and
resources to accomplish the desired goals. It involves
(a) Identification and division of work
(b) Departmentalisation
(c) Assigning of duties
(d) Establishing reporting relationships

3. Staffing Organisational goals can be achieved only through human efforts. It Is
the duty of management to make the best possible use of this resource. Thus,
placing the right person on the right job is very important. Staffing helps
management to motivate, select and place the right person on the right job.

4. Directing Directing involves leading, influencing and motivating employees to
perform the tasks assigned to them. This requires establishing an atmosphere that
encourages employees to do their best. Directing comprises of four elements;
supervision, motivation, leadership and communication.

5. Controlling Controlling is the management function of monitoring organisational
performance towards the attainment of organisational goals. The task of
controlling involves
(a) Establishing standards of performance
(b) Measuring current performance
(c) Comparing this with established standards
(d) Taking corrective action

Multiple Choice Questions

Question 1. Which is not a function of management of the following?
(a) Planning
(b) Staffing
(c) Co-operating
(d) Controlling

Answer : (c) Co-operating is not the function of management.

Question 2. Management is

(a) an art
(b) a science
(c) Both art and science
(d) Neither

Answer : (c) Management has features of both art and science as it relies on practice,
thus it an art and it is based on the principles which are the outcome of science. Thus, it
is science also.

Question 3. The following is not an objective of management
(a) earning projects
(b) growth of the organisation
(c) providing employment
(d) policy making

Answer : (d) Policy making is not the objective of management.

Question 4. Policy formulation is the function of

(a) top level managers
(b) middle level managers
(c) operational management
(d) All of these

Answer : (a) Top level managers focusses on determination of objectives and
formulation of policies.

Question 5. Co-ordination is

(a) function of management
(b) the essence of management
(c) an objective of management
(d) None of these

Answer : (b) Co-ordination brings unity of action and integrates different activities.
Thus, it is considered as the essence of management.

Case Problems

1. Company X is facing a lot of problems these days. It manufactures white goods like
washing machines, micro-waves, refrigerators and air conditioners. The company’s
margins are under pressure and the profits and market share are declining. The
production department blames marketing for not meeting sales targets and marketing
blames production department for producing goods, which are not of good
quality meeting customers expectations. The finance department blames both
production and marketing for declining return on investment and bad marketing.

Question : What quality of management do you think the company is lacking? Explain
briefly. What steps should the company management take to bring the company back
on track?

Answer : Co-ordination IS missing in Company X. All the departments are not co-
ordinannq with each other and that is why they end up blaming each other for the poor
performance. To bring co-ordination. management should take the following steps

1. After the goals are established. it should be communicated to all departments well
in advance to understand its importance and their role In helping to achieve it.

2. Managers ensure that all departments co-ordinate with each other.
3. Wherever is the difference of interest. the managers should try and strike a

balance so that they all work in the same direction.

4. Meetings between the departmental heads of production. marketing. finance etc
should be organised on regular basis and in routine to solve problems when they
emerge.

2. A company wants to modify its existing product in the market due to decreasing
sales. You can imagine any product about which you are familiar.

Question : What decisions/steps should each level of management take to give effect
to this decision?

Answer : The three leves of management will work together towards the modification
of the product with the motive of increasing sales. The following are the three levels of
management.

1. Top Management
2. Middle Management
3. Lower Management

Decisions Taken by Top Management for Increasing Sales

1. Direction of modification.
2. Drafting sales targets and various sales plans and sales incentives.
3. How to enhance the value of the product in qualitative terms?
4. Thinking of the financial requirements.
5. Marketing and promotional techniques required for fastening the sales.

Decisions Taken by Middle Level Management for Increasing Sales

1. Interpretation of the policies framed by top management to the lower level
management.

2. Hiring necessary personnel with the required qualities and qualifications.
3. Assigning responsibility as per capability and establishing the supervisor-

subordinate relationship.
4. Co-operating with the team members as well as first line supervisors.

5. Taking the feedback and arranging the follow up meeting.

Decisions Taken by Lower Level Management for Increasing Sales

1. Interpretation of planned targets to the actual work force and labourers.
2. Helping and directing the workers regarding how to carry out the work.
3. Maintaining standards, quality control and frequent checks
4. Minimisation of wastage and motivatinq the workers so that they can deliver up to

their maximum potential.
5. Communicating the grievances and feedback to the middle management and

bringing in the changes if required

3. A firm plans in advance and has a sound organisation structure with efficient
supervisory staff and control system. On several occasion, it finds that plans are not
being adhered to, It leads to confusion and duplication of work.

Question : Advise remedy.

Answer : As per the case. the problem is in co-ordination and in communicating the
work schedule. Because the duplication of work implies that there is a lack of co-
ordination in between the levels of management as well as there is a problem in
communication because the confusion is only arise when the things are not
communicated properly.

Following Remedies are to be Taken

1. A proper communication pattern is to be followed
2. A proper co-ordination is to be made between the workers.
3. Time to time feedback is to be taken by the managers from the bottom level.
4. There is a transparency in the working pattern.

NCERT Solutions for Class 12th Business
Studies Chapter 2 – Principles of Management

National Council of Educational Research and Training (NCERT) Book Solutions for
class 12th
Subject: Business Studies
Chapter: Chapter 2 – Principles of Management

These Class 12th NCERT Solutions for Business Studies provide detailed, step-by-step
solutions to all questions in an Business Studies NCERT textbook.

Click Here for Class 12 Business Studies Notes.
Class 12th Business Studies Chapter 2 – Principles of Management NCERT Solution is
given below.

Multiple Choice Questions

Question 1. Principles of management are not

(a) universal
(b) flexible
(c) absolute
(d) behavioural

Answer (c) Principles of management are not absolute as they
are flexible behavioral and universal nature

Question 2. How are principles of management formed?

(a) In a laboratory
(b) By experiences of managers

(c) By experiences of customers
(d) By propagation of social scientists

Answer (b) Principles of management are formed by the experiences of manager as It
provides useful Insights into reality.

Question 3. The principles of management are significant because of

(a) increase in efficiency
(b) initiative
(c) optimum utilization of resources
(d) adaptation to changing technology

Answer (c) Principles of management are Significant because It helps in increasing
overall efficiency.

Question 4. Henry Fayol was a

(a) social scientist
(b) mining engineer
(c) accountant
(d) production engineer

Answer (b) Henry Fayol was a mining engineer and management theorist.

Question 5. Which of the following statement best describes the principle of ‘Division of
Work’?

(a) Work should be divided into small tasks
(b) Labour should be divided
(c) Resources should be divided among jobs
(d) It leads to specialisation

Answer (a) Division of work implies division of work into small tasks.

Question 6. ‘She/He keeps machines, materials, tools etc ready for operations by
concerned workers’. Whose work is described by this sentence under functional
foremanship?

(a) Instruction card clerk
(b) Repair boss
(c) Gang boss
(d) Route clerk

Answer (c) Gang boss, keeping machines and tools.

Question 7. Which of the following is not a Principle of management given by Taylor?

(a) Science, not rule of the thumb
(b) Functional foremanship
(c) Maximum not restricted output
(d) Harmony not discord

Answer (b) Taylor advocated separation of planning and execution functions. This
concept is known as functional foremanship.

Question 8. Management should find ‘One best way’ to perform a task. Which
technique of scientific management is defined in this sentence?

(a) Time study
(b) Motion study
(c) Fatigue study
(d) Method study

Answer (d) The objective of method study is to find out one best way of doing job.

Question 9. Which of the following statements best describes ‘Mental Revolution’?

(a) It implies change of attitude
(b) The management and workers should not play the game of one upmanship
(c) Both management and workers require each other
(d) Workers should be pain more wages

Answer (a) Mental revolution implies change In the attitude of workers and
management towards one another.

Question 10. Which of the following statements is false about Taylor and Fayol?

(a) Fayol was a mining engineer whereas Taylor was a mechanical engineer
(b) Fayol’s principles are applicable in specialised situations whereas Taylor’s principles
have universal application
(c) Fayol’s principles were formed through personal experience whereas Taylor’s
principles were formed through experimentation
(d) Fayol’s principles are applicable at the top level of management whereas Taylor’s
principles are applicable at the shop floor

Answer (b) Fayol’s principle are universally applicable whereas Taylor’s principles
applied in special situations

Short Answer Type Questions

Question 1. How is the Principle of ‘Unity of Command’ useful to management? Explain
briefly.

Answer Principle of Unity of Command Implies that each and every subordinate should
have one and only one boss Orders and instructions should come from only one head
This helps the working of any organisation in the following manner

1. Authority responsibility relationship Is clearly defined.

2. Subordinates are known for whom they are accountable.
3. Discipline and order is maintained.

Question 2. Define scientific management. State any three of its principles.

Answer Scientific management can be defined as knowing exactly what you want from
men to do and seeing that they do it In the best and cheapest way.

Scientific management aims at choosing the best. Method to get the maximum output
from the workers the principles of scientific management are mainly applicable to the
shop-floor level.

Three principles of scientific management are as follows

1. Science, Not Rule of Thumb When different managers use their own different
methods to get the work done it is rule of thumb. Taylor believed that there was
only one best method to maximise efficiency. Taylor advised that every
organisation should compare the results of different methods, test them again and
again and finally select one best method of getting the work done.

2. Harmony, Not Discord Managers are an extension of the management and
serve as a link between workers and the owners. Workers have to take
instructions from the managers and managers have to get the work done through
the workers. Oftentimes the relation between them is spoilt which is very harmful
for everyone-workers, managers and owners. This class conflict should be
replaced by harmony between the two. Both should change their thinking towards
each other. Both should give importance to each other. This is known as mental
revolution.

3. Co-operation, Not Individualism There should be complete co-operation
between the labour and the management instead of individualism. This principle is
an extension of the principle of
‘Harmony not discord.’ The management and the workers should not compete
with each other rather co-operate with each other. Management should consider
all good suggestions made by the employees which can help in cost reduction. At

the same time, workers should never think of going or stickes in order to get their
unreasonable demands fulfilled.

Question 3. If an organisation does not provide the right place for physical and human
resources in an organisation, which principle is violated? What are the consequences of
it?

Answer The principle of order is violated I if an organisation does not provide the right
place for physical and human resources.

If this principle is violated then

1. Lots of time will be wasted in locating the different resources.
2. This will lead to delayed decisions.
3. Wastage of energy which will lead to in efficiency and delay In production.
4. Causes hindrance in the activities of business.

Question 4. Explain any four points regarding significance of Principles of
management.

Answer Significance of principles of management

1. Providing Managers with Useful Insights into Reality When managers follow
principles it adds to their knowledge, ability and understanding of managerial
situations and circumstances. This improves managerial efficiency e.g., when
managers use principle of delegation then they get more time to concentrate on
critical areas of working.

2. Scientific Decision Making management principles help in thoughtful decision
making, They emphasise on logic rather than blind faith. Here, decisions are
based on the objective assessment of the situation.

3. Optimum Utilisation of Resources and Effective Administration Principles
help the managers to conceptualise the net effect of their decision rather than

going for trial and error method resulting in saved time, efforts and energy thereby
increased productivity.
4. Management Training, Education and Research Principles of management are
the base for management theory. As such they are used as a basis for
management training, education and research. These principles provide basic
groundwork for the development of management as a subject. Professional
courses like BBA, MBA also teaches these principles as part of their curriculum.
Question 5. Explain the principle of ‘Scalar Chain’ and gang plank.

Answer Principle of Scalar Chain and Gang plank

The formal lines of authority from highest to lowest ranks are known as scalar chain.
According to Fayol, “Organisation should have a chain of authority and communication
that runs from top to bottom and should be followed by managers and subordinates.

In the diagram, 0 is heading 2 teams where A and X are at the same level, B and Yare
at the same level and C and Z are at the same level. The line of communication is
clearly defined A to B to C and X to Y to Z. Authority responsibility relationship is also
very clear. But C and Z cannot directly contact each other. This some times may take lot
of time during an emergency to communicate as per the prescribed flow to avoid this
problem a system known as ‘Gang Plank’ was introduced where in Cor Z could contact
each other and same way Band Y could contact each other.

Long Answer Type Questions

Question 1. Explain the principles of scientific management given by Taylor.

Answer Principles of scientific management are given by FW Taylor

1. Science, Not Rule of Thumb When different managers use their own different
methods to get the work done it is rule of thumb. Taylor believed that there was
only one best method maximise efficiency. Taylor advised that every organisation
should compare the results of different methods, test them again and again and
finally select one best method of getting the work done.

2. Harmony, Not Discord Managers are an extension of the management and
serve as a link between workers and the owners. Workers have to take the
instructions from the managers and managers have to get the work done through
the workers. Sometime the relation between them is spoilt, which is very harmful
tor everyone-workers, managers and owners. This class conflict should be
replaced by harmony between the two. Both should change their thinking towards
each other. This is known as mental revolution.

3. Co-operation, Not Individualism There should be complete co-operation
between the labour and the management instead of individualism. This principle is
an extension of principle of harmony, not discord. The management and the
workers should not compete with each other rather co-operate with each other.
Management should consider all good suggestions made by the employees which
can help in cost reduction. At the same time workers should never think of going
on strikes in order to get their unreasonable demands fulfilled.

4. Development of Each and Every person to His or her Greatest Efficiency and
Prosperity Scientific management also stood for worker development. Taylor
believed that workers should be aware of the ‘best method’. On the other hand, all
organisations should select employee carefully in order to get maximum efficiency.
When the duties are allotted, perfect match should be made between the
requirements of the job and the capabilities of the worker. Training should be
provided to improve the skills further. In this way, efficiency will go higher resulting
in prosperity for both workers and company.

Question 2. Explain the following principles of management by Fayol with examples.

(a) Unity of direction
(b) Equity
(c) Espirit de Corps
(d) Order
(e) Centralisation and decentralisation
(f) Initiative

Answer Fayol introduced general principles of management Some of them have been
explained below

(a) Unity of Direction All the units of an organisation should be moving towards the
same objective Each group of activities having the same objective must have one head
and one plan. Each group should have its own incharge and on no account the working
of two divisions neither be overlaped.

(b) Equity This principle emphasise kindliness and justice in the behaviour of managers
towards workers. This will ensure loyalty and devotion Lazy personnel should be dealt
sternly and strictly There should be no discrimination against anyone on account of
gender, religion, caste language or nationality etc All decisions should be merit based

(c) Espirit de Corps This principle emphasises on building harmony and team spirit
among employees. In a large organisation large work force teamwork is very important.
Teamwork due to a leads to better co-ordination while working. The head of each team
should give credit of good result to the whole team rather than confining it to his own
self.

(d) Order A place for everything and everyone in his/her place. Basically it means
orderlinss. If there is a fixed place for different things n a factory and they remain In their
places then no time is wasted In locating them Same way if every personnel is allocated
an area to operate from then his co-workers head or subordinates, anyone can contact
him easily.

(e) Centralisation and Decentralisation Concentration of authority in a few hands is
centralisation and its dispersal among more number of people is decentralisation Fayol
believed that an organisation should not work with anyone of them in isolation A
combination of both is important simple, easy and work of routine type should be
decentralised and critical important type of work should be centralised.

(f) Initiative Initiative means taking the first step wIth self-motivation workers should be
encouraged to develop and carry out their plans for improvements according to Fayol.
initiatives should be encouraged. A good company should Invite suggesllons from
employees which can result in substantial cost/time reduction Rewards can be given to
fruitful suggestions.

Question 3. Explain the technique of ‘Functional Foremanship’ and the concept of
‘Mental Revolution’ as enunciated by Taylor.

Answer Functional Foremanship Taylor advocated separation of planning and
execution functions. This concept was extended to the lowest level of the shop floor. It
was known as functional foremanship.

Under the factory manager, there is a planning incharge and a production incharge.

Under the planning incharge. the work goes as follows

1. Instruction Card Clerk Draft instructions for the workers,
2. Route Clerk Specify the route of production.
3. Time and Cost Clerk Prepare time and cost sheet.
4. Disciplinarian Ensure discipline,

Under the production incharge. the work goes as follows

1. Speed Boss Timely and accurate completion of work,
2. Gang Boss Keeping tools and machines ready for operation by workers.
3. Repairs Boss Ensure proper working conditions of machines.
4. Inspector Check the quality of work.

Mental Revolution

In a factory, the managers served as a link between the owners and the workers The
managers have to get the work done from the workers which created sometimes
problem between the two. Taylor emphasized that there should be harmony between
the management and workers Both should realise that each one is Important. For this
both had to change their thoughts for each other, This IS known as ‘Mental Revolution’.
Management should share the gains of the company with the workers and at the same
time workers should work hard and be ready to accept any change made for the
betterment of the organisation.

Question 4. Discuss the following techniques of scientific work study

(a) Time study

(b) Motion study

(c) Fatigue study
(d) Method study
(e) Simplification and standardisation of work

Answer Some of the techniques of scientific work study are

(a) Time Study It determines the standard time taken to perform a well-defined job. The
standard time is fixed for the whole of the task by taking several readings. The method
of time study will depend upon volume and frequency of the task, the cycle time of the
operation and time measurement costs There are three objectives achieved through
time study

1. Determine the number of workers
2. Frame suitable incentive schemes
3. Determines labour costs.

e.g.. If standard time taken to do a piece of work in 20 minutes then one work can be
done 3 times In an hour and total 21 times (3 x 7 hours per day) the work can be done
on a single day.

(b) Motion Study Motion study refers to the study of movements like lifting putting
objects sitting and changing pos.nons On close examination of body motions e.g., It IS
possible to find out three types motions

1. Motions which are productive.
2. Motions which are incidental.
3. Motions which are unproductive.

Out of the above three workers were motivated to eliminate the third type completely
and reduce the second one to the minimum This help in increasing productivity

(c) Fatigue Study Fatigue study seeks to determine the amount and frequency of rest
intervals in completing a task. A person is bound to feel tired physically and mentally if
he does not take rest while working. The next intervals will help one to regain stamina
and work again with the same efficiency for e.g., in an organisation working hours are 9
to 5. There is a lunch break of an hour for the workers to take rest similarly In a school
there is a break tor the students and teachers after 4 periods of continuous learning.

(d) Method Study The objective of method study is to find out one best way of doing
the job. Different managers would use their own different methods of getting the work
done. But there is always one best method. Right from procurement of raw materials till
the final product is delivered to the customer every activity is the part of method study.
The objective of whole exercise IS to minimise the cost of production and maximise the
satisfaction of the customer.

(e) Simplification and Standardisation of Work Standardisation refers to the process
of setting standards for every business activity e.g., process, raw material, time,
product, machinery, methods or working conditions. The objective of standardisation are

1. To reduce product to fixed types, sizes, features etc.
2. To establish interchangeability of various parts.
3. To establish standards of excellence and quality in materials.
4. To establish standards of performance of men and machines.
Simplification aims at eliminating unnecessary diversity of products. It results in savings
of cost of labour, machines and tools. It implies reduced inventories, fuller utilisation of
equipment and increasing turnover.

Question 5. Discuss the differences between the contributions of Taylor and Fayol.

Question 6. Discuss the relevance of Taylor and Fayol’s contribution in the
contemporary business environment.

Answer Relevance of Taylor and Favors contribution in the contemporary business
environment.

Both Fayol and Taylor have given principles of management to improve efficiency In an
organisation. Taylor gave us scientific principles of management which are being
adopted by all organisations to improve Its productivity at the shop floor level, the
principles help in giving effective results. In the same manner, Henry Fayol gave in
general principles of management which when implemented at any of the levels-top,
middle or lower and helps in achieving better co-ordination, remove ambiguity and
encourage the employees to improve their work performance.

Case Problems

1. ‘F’ limited was engaged in the business of food processing and selling its products
under a popular brand. Lately the business was expanding due to good quality and
reasonable prices. Also with more people working the market for processed food was
increasing. New players were also corning to cash in on the new trend. In order to keep
its market share in the short run the company directed its existing workforce to work
overtime.

But this resulted in many problems. Due to increased pressure of work, the efficiency of
the workers declined. Sometimes the subordinates had to work for more than one
superior resulting in declining efficiency. The divisions that were previously working on
one product were also made to work on two or more products. This resulted in a lot of
overlapping and wastage. The workers were becoming undisciplined. The spirit of
teamwork, which had characterised the company, previously was beginning to wane.
Workers were feeling cheated and initiative was declining. The quality of the products
was beginning to decline and market share was on the verge of decrease.

Actually the company had implemented changes without creating the required
infrastructure.

Question 1. Identify the principle of management (out of 14 given by Henry Fayol) that
were being violated by the company.

Answer Company violated following principles

1. Division of work
2. of command
3. Unity of direction
4. Discipline
5. Subordination of individual interest to general interest
6. Order
7. Initiative

8. Remuneration

Question 2. Explain these principles in brief.

Answer

1. Division of Work As per the case work is not divided among the workers as per
their specialisation. As specialisation is the most efficient way to use human
efforts and produces more and better work.

2. Unity of Command In the case subordinates had to work for more than one
superior. This results in declining efficiency. As per Fayol’s principle of unity of
command there should be one boss and if it is violated it results in authority is
undetermined, discipline is in jeopardy, order distributed and stability threatened.
Same we are observing in the above case.

3. Unity of Direction The units of an organisation should be moving towards the
same objective. Each group must be having same objective must have one head
one plan. But in case first the producers are working on one product then moved
to two or more group. Thus, this principle is also violated.

4. Discipline In the case, there is a lack of formalised control as the workers are
working beyond there abilities. There is no rules and regulations as well as lack of
employment agreement.

5. Subordination of Individual Interest to General Interest Every individual is working
better only when the organisation is giving priority to their general interest. In the
case, company in only focusing over its objective not on employees.

6. Order People and materials must be in suitable places at appropriate time for
maximum efficiency. But In case they are not following the order of anything.

7. Initiative It implies that workers should be self motivated, suggestions should be
taken from the employees. It results in substantial cost and time reduction but
here they are taking no feedbacks, no suggestions.

8. Remuneration The workers should get the fair wages but in case workers are
performing day and night but they are not getting a fair amount for the same. This
results that they are feeling cheated.

Question 3. What steps should the company management take in relation to the above
principles to restore the company to its past glory?

Answer Following steps should be taken by the company to retain its past glory

1. Work is divided into small tasks and distributed among the employees as per their
specialisation.

2. There should be one boss.
3. Functions should be performed under one head or one plan.
4. Formalised control should be maintained.
5. Proper remuneratIOn and Impressive Incentives should be given
6. Hierarchical communication pattern is to be followed
7. Suggestions and feedback shoo d be taken from the employees.
8. Maintain high morale among employees

2. The management of company ‘F’ Limited now realised its folly.

In order to rectify the situation, it appointed a management consultant ‘M consultants’ to
recommend a restructure plan to bring the company back on the rails. ‘M consultants’
undertook a study of the production process at the plant of the company ‘F’ limited and
recommended the following changes

1. The company should introduce scientific management with regard to production.
2. Production Planning including routing, scheduling, dispatching and feedback

should be implemented.
3. In order to separated planning from operational management ‘Functional

foremanship’ should be introduced.
4. Work study should be undertaken to optimise the use of resources.
5. ‘Standardisation’ of all activities should be implemented to increase efficiency and

accountability.
6. To motivate the workers ‘Differential Piece Rate System’ should be implemented.
7. The above changes should be introduced apart from the steps recommended in

case problem-l (as an answer to question number 3 of that case problem).

It was expected that the changes will bring about a radical transformation in the working
of the company and it will regain its pristine glory.

Question 1. Do you think that introduction of scientific management as recommended
by M consultants will result in intended outcome.

Answer Though scient ftc management IS the best solution but still it Will not be able to
give very effective results as It has its own limitations

1. As competition has Increased market research now Will not help much.
2. Appointing professionals which increase the cost.
3. Principle of initiative will not help if functional foremanship will also be adopted.
4. In differential piece wage system only efficient workers may gain, the others will

be in pain as they might lose their wages if target not met. This will lead instability
which is harmful.
5. Lot of stress will be generated from top to lower level.

Question 2. What precautions should the company undertake to implement the
changes?

Give your enunciated answer with regard to each technique in points 1 through 6 in the
case problem.

Answer A large number of changes will not accepted by anyone. So the company
should play safe while making any changes.

1. Trained staff can be appointed for few areas and workers can be trained to
improve efficiency levels.

2. Production planning to be done with care.
3. Functional foremanship can be introduced but it not lead to clear killing of

initiative. Workers should be consulted for suggestions.
4. Optimum use of method, time, motion and fatigue study should be done. ,

5. Standardisation can be implemented for material, machinery and features of
product.

6. Financial incentives should be provided to workers to get more work rather than
adopting differential piece wage system.

NCERT Solutions for Class 12th Business
Studies Chapter 3 – Business Environment

National Council of Educational Research and Training (NCERT) Book Solutions for
class 12th
Subject: Business Studies
Chapter: Chapter 3 – Business Environment

These Class 12th NCERT Solutions for Business Studies provide detailed, step-by-step
solutions to all questions in an Business Studies NCERT textbook.

Click Here for Class 12 Business Studies Notes.
Class 12th Business Studies Chapter 3 – Business Environment NCERT Solution is
given below.

Multiple Choice Questions

Question 1. Which of the following does not characterise the business environment?

(a) Uncertainty
(b) Employees
(c) Relativity
(d) Complexity

Answer (b) Employees does not characterise the business environment

Question 2. Which of the following best indicates the importance of business
environment?

(a) Identification
(b) Improvement in performance

(c) Coping with rapid changes
(d) All of these

Answer (d) Identification, Improvement In performance, coping with rapid changes all
are the indicators of importance of business environment.

Question 3. Which of the following is an example of social environment?

(a) Money supply in the economy
(b) Consumer Protection Act
(c) The Constitution of the country
(d) Composition of family

Answer (d) Social environment Includes social forces thus, composition of families is
the example of social environment

Question 4. Liberalisation means

(a) integrating among economies
(b) reduced Government controls and restrictions
(c) policy of planned disinvestments
(d) None of the above

Answer (b) Liberalisation means end of license, quota and reduction of government
controls and restrictions

Question 5. Which of the following does not explain the impact of Government policy
changes on business and industry?

(a) More demanding customers
(b) Increasing competition
(c) Change in agricultural prices
(d) Market orientation

Answer (c) Change in agricultural prices does not exotom the impact of Government
policy changes on business and industry.

Short Answer Type Questions

Question 1. What do you understand by business environment?

Answer The term ‘business environment’ means the sum total of all Individuals,
institutions and other forces that are outside the control of a business enterprise but that
may affect its performance. The economic. social political, technological and other
forces which operate outside the business enterprise are part of its environment.

Question 2. Why it is important for business enterprises to understand their
environment? Explain briefly.

Answer It is important for business organisations to understand their environment
because of the following reasons

1. It Enables the Firm to Identify Opportunities and Getting the First Mover
Advantage Environment provide numerous opportunities for business Early
identification of opportunities helps an enterprise to use it before instead of losing
them to competitors.

2. It Helps the Firm to Identify Threats and Early Warning Signals Environmental
awareness can help managers to identify various threats on time and serve as an
early warning signals.

3. It Helps in Tapping Useful Resources Environment is a source 01 various
resources for running a business To engage In any type of activity, a business
enterprise assembles various resources called inputs. This can be done better by
understanding what the environment has to offer.

4. It Helps in Coping with Rapid Changes All types of enterprises facing
increaSingly dynamic environment In order to effectively cope with these
Significant changes, managers must understand and examine the environment
and develop suitable courses of action

5. It Helps in ASSisting in Planning and Policy Formulation Since environment is
the source of opportunities and threats, ItS understanding and analysis becomes
the base for various policies to be framed and strategies to be made.

6. It Helps in Improving Performance The enterprises that continuously monitor
their environment and adopt suitable business practices are the ones. which not
only improve their present performance but also continue to succeed in the market
for a longer period.

Question 3. Mention environment the various dimensions of business environment.

Answer

1. Economic Environment Interest rates Inflation rates value of rupee and many
more are the economic factors that can affect management practices in a
business enterprise

2. Social Environment The social environment of business Includes the social
forces like customs and traditions values, social trends etc

3. Technological Environment This includes forces relating to scientific
improvements and Innovations whIch provide new ways of producing goods and
services and new methods and techniques of operating a business

4. Political Environment This includes political conditions such as general stability
and peace in the country and specific attitudes that elected government
representatives hold towards business.

5. legal Environment This includes various legislations passed by government
authorities and court Judgements It IS important for the management of every
enterprise to obey the law of land and for this, enough of knowledge of rules and
regulations framed by the government is a pre-requisite for better performance.

Question 4. Briefly explain the following

(a) Liberalisation
(b) Privatisation
(c) Globalisation

Answer The three important features of New Economic Policy, 1991

(a) Liberalisation Under the new economic policy of 1991. -he economic reforms that
were introduced aimed at liberaliSing the Indian business and industry from all
unnecessary controls and restrictions. They signalled the end of the licence-permit
quota raj.

(b) Privatisation The new set of economic reforms that aim at giving greater role to the
private sector in the nation building process and a reduced role to the public sector.

(c) Globalisation Globalisation means the integration of the various economies of the
world leading towards the emergence of a cohesive global economy. Till 1991, India
had a policy which strictly regulated imports in value and volume terms. After 1991, the
reforms aimed at Import liberalisation.

Question 5. Briefly discuss the impact of Government policy changes on business and
industry.

Answer Impact of Government policy changes on business and Industry

1. Increasing Competition As a result of liberalisation, privatisation and globalisation
number of players Increased in all sectors and Increased competition for
everyone.

2. More Demanding Customers Increased competition in the market gives the
customer wider choices in purchasing better quality of goods and services, which
makes them more demanding

3. Rapidly Changing Technological Environment New technologies help to improve
machines, process products and services. The rapidly changing technological
environment creates tough challenges before smaller firms.

4. Necessity for Change After 1991, the market forces have become turbulent as a
result of which the enterprises have to continuously modifying their operations.

5. Need for Developing Human Resource The new market conditions require people
with higher competence and greater commitment. Hence. the need for developing
human resources emerged.

6. Market Orientation Earlier, production was taken up first and then selling was
done. Now, due to Increasing competition and more demanding customers firms
have to study and analyse the market hrst and produce goods accordingly.

7. Loss of Budgetary Support to the Public Sector Public sector have less of
budgetary support from the Central Government. Now, they have to generate their
own resources and be more efficient in order to survive and grow.

Long Answer Type Questions

Question 1. How would you characterise business environment? Explain with
examples, the difference between general and specific environment.

Answer Features of business environment

1. Totality of External Forces Business environment is aggregative in nature as It is
the sum total of all things external to business firms.

2. Inter-relatedness Different elements of business environment are closely related
to each other. e.g., increased awareness of health care have increased the
demand for many health products.

3. Dynamic Nature The business environment is highly dynamic. It keeps on
changing. Sometimes there is a change In technology, tastes and preference of
consumer etc

4. Uncertainty The environment cannot be predicted. It IS highly uncertain and
unpredictable.

5. Complexity Since there are many elements of business Environment and they are
Inter-related and dynamic in nature Therefore, it becomes very difficult to
understand them as a whole.

Difference between Specific and General Environment There are two types of forces
operating in business environment specific and general Specific forces affect the
individual enterprises directly and Immediately, e.g., customers, suppliers

General forces affect the firms and only indirectly e g , social conditions or political
conditions.

Question 2. How would you argue that the success of a business enterprise is
significantly influenced by its environment?

Answer Importance of business environment

1. It Enables the firm to Identify Opportunities and Getting the First Mover Advantage
Environment provides numerous opportunities for business success. Early
identification of opportunities helps an enterprise to be the first to exploit them
instead of loosing them to competitors, e g., Eureka Forbes introduced Aquaguard
and took away the cream of demand.

2. It Helps the Firm to Identify Threats and Early Warning Signals Environment
happens to be the source of many threats Environmental awareness can help
managers to identity various threats on time and serve as an early warning signals
e.g. Lakme took serious steps to improve the quality and types of products as
foreign multinational cosmetics companies started coming to India after 1991.

3. It Helps in Tapping Useful Resources Environment offers various resources for
running a business in return the business enterprise supplies the environment
With its outputs such as goods and services for customers taxes for government.
In order to arrange for the best possible resources, better understanding of the
environment becomes Important

4. It Helps in Coping with Rapid Changes It is not the fact of change itself that is so
Important as the pace of change There are many changes taking place in the
environment and at a fast speed. In order to effectively cope with these changes,
managers must understand and examine the environment and develop Suitable
courses of action .

5. It Helps in Assisting in Planning and Policy Formulation Since environment is a
source of both opportunities and threats Its understanding and analysis only helps
In formulating the best possible policies to handle the future properly

6. It Helps in Improving Performance Continuous monitoring and adopting changes
in an enterprise will help if! Improving not only their present performance. but also
continue to succeed in the market in long run.

Question 3. Explain with examples, the various dimensions of business environment.

Answer Dimension of business environment

(i) Economic Environment It includes the changes In the system due to economic
policies made by the government. Reserve Bank of India is the key regulator of
country’s economic environment since it

(a) influences the Interest rates
(b) controls the flow of money in the economy
(c) regulates the working of banks

Example When the banks reduce the interest rates on long term loans. automobiles
and construction industries get a boost to the business as more spending is made on
the purchase of homes and cars through loans.

(ii) Social Environment The social environment of business Include the social forces
like customs and traditions, values social trends, society’s expectations from business
etc. In business terms, these values translate into freedom of choice in the market.
Major elements of social environment are

(a) life expectancy
(b) shifts in the presence of women in the workforce
(c) consurnonon habits

Example Due to the sh It In the presence of women in the workforce the demand for
readymade ladles formal wear, cosmetics, packed/processed food, electronic gadgets
has gone up.

(iii) Technological Environment Technological environment Includes forces relating to
scientific Improvements and innovations which provide new ways of producing goods
and services and new methods and techniques of operating a business.

Example Because of technological advancement, it has become possible to book
railway tickets through internet from home, office etc.

(iv) Political Environment Political environment includes political conditions such as
general stability and peace In the country and specific attitudes that elected government
representatives hold towards business. It is only of use when a business enterprise can
predict its business activities under stable political conditions. Major elements of political
environment are

(a) The constitution of the country
(b) The nature and profile of political leadership and thinking of political personalities
(c) Political ideology and practices of the ruling party.

Example After the NEP of 1991, due to globalisation the foreign companies started
coming to India, but due to the bureaucratic red tape it became difficult for them to cut
through it to do business here. As a result, these companies were discouraged in our
country regarding investments. The situation has improved overtime.

(v) Legal Environment Legal environment includes various legislations passed by the
Government administrative orders Issued by government authorities, court judgements
as well as the decisions rendered by various commissions and agencies. It is imperative
for the management of every enterprise to obey the law of the land. Therefore, an
adequate knowledge of rules and regulations framed by the government is a pre-
requisite for better business performance.

Example There is a government regulation to protect consumer’s interest e.g., the
advertisements of alcoholic beverages is prohibited.

Question 4. What economic changes were initiated by the Government under the
Industrial Policy, 1991? What impact have these changes made on business and
industry?

Answer Economic changes initiated by the government under the Industrial Policy,
1991

1. The government reduced the number of industries under compulsory licensing to
six.

2. The role of public sector was reduced. It was now limited only to four industries of
strategic importance.

3. Disinvestment was carried out in case of many public sector industrial enterprises.
4. Foreign Direct Investment was permitted.
5. Automatic permission was now granted for technology agreements with foreign

companies.
6. Foreign Investment Promotion Board (FIPB) was set up to promote and

channelise foreign investment in India.

The Indian corporate sector has come lace-to-face with several challenges due to
government policy changes. Some of them are

1. Increasing Competition The competition has Increased due to entry of new players
(pnvausanon and globalisation).

2. More Demanding Customers Customers today. has become more demanding
because they are well-informed. Increased competition in the market gives the
customers Wider choice In purchasing better quality of goods and services.

3. Rapidly Changes Technological Environment The rapidly changing technological
environment creates tough challenges before smaller firms

4. Necessity for Change After 1991. the market forces have become turbulent as a
result of which the enterprises have to continuously modify their operations.

5. Need for Developing Human Resources Earlier. Indian enterprises worked with
inadequately trained personnel The new market conditions require people with
higher competence and greater commitment Hence. the need for developing
human resources

6. Market Orientation Before 1991. all firms worked with production oriented
marketing operations. In a fast changing world. there was a shift to markel
orientation. The firms had to study and analyse the market first and produce
goods accordingly.

7. Loss of Budgetary Support to the Public Sector The public sector undertakings
have realised that in order to survive and grow, they will have to be more efficient
and generate their own resources for the purpose

Question 5. What are the essential features of

(a) Liberalisation
(b) Privatisation
(c) Globalisation

Answer Essential features of

(a) Liberalisation

1. Abolishing licensing requirements In most of the industries a short list. except
2. No restriction on expansion or contraction of business.
3. Free movement of goods and services
4. Freedom in fixing the prices of goods and services.
5. Reduction in tax rates.
6. Simplifying procedures for imports and exports.
7. Making it easier to attract foreign capital and technology to India.

(b) Privatisation

1. The government redefined the role of public sector.

2. Policy of planned disinvestments of the public sector
3. Refining of sick enterprises to the Board of Industrial and Financial

Reconstruction.

(c) Globalisation

1. Import liberalisation
2. Export promotion
3. Foreign exchange reforms

Case Problem

Lately many companies have planned for significant investment in organised retailing in
India. Several factors have prompted their decision in this regard.

Customers income is rising. People have developed a taste for better quality products
even though they may have to pay more. The aspiration levels have increased. The
government has also liberalised its economic policies in this regard and permitted even
cent per cent foreign direct investment in some sectors of retailing.

Question 1. Identify changes in business environment under different heads –
economic, social, technological, political and legal that have facilitated the companies
decisions to plan significant invstments in organised retailing.

Answer Changes which have taken place In the following areas are as follows

1. Economic Availability of more money because of employment opportunities
increasing.

2. Social Tastes of customers are changing. As he is getting more exposure to the
outside world his tastes are changing.

3. Technological Technological advancements have led to advanced ways of
counting. checking. coding. billing discounts which are convenient for the
customer and also retailer.

4. Political Government policies are encouraging developers to go mass construction
on real estate. As MNCs are coming to India, they have to be provided an
Internationally based infrastructure to operate from.

5. Legal As the government is providing more rights to the consumers, an organised
retailing outlets would be more particular in taking care as compared to a small
retailer.

Question 2. What has been the impact of these changes with regard to globalisation
and privatisation?

Answer Due to globalisation and privatisation, more retailers from India and abroad are
encouraged to make investments in organised retailing The competition has increased,
the consumers are more demanding and expert working force is required in order to
cope up with the changes, which have taken place and are further changing.

NCERT Solutions for Class 12th Business
Studies Chapter 4 – Planning

National Council of Educational Research and Training (NCERT) Book Solutions for
class 12th
Subject: Business Studies
Chapter: Chapter 4 – Planning

These Class 12th NCERT Solutions for Business Studies provide detailed, step-by-step
solutions to all questions in an Business Studies NCERT textbook.

Click Here for Class 12 Business Studies Notes.
Class 12th Business Studies Chapter 4 – Planning NCERT Solution is given below.

Short Answer Type Questions

Question 1. What are the main points in the definition of planning?

Answer : The main points in the definition of planning are as follows

1. Planning is deciding in advance what to do and how to do.
2. It is one of the basic managerial function.
3. Planning involves setting objectives and developing an appropriate course of

action to achieve these objectives.
4. It bridges the gap between where we are and where we want to reach.

Question 2. How does planning provide direction?

Answer : Planning provides direction for action by deciding in advance what has to be
done, how to do, when to do and who will do. When we try to seek answers to the
above questions, which are well planned then directions are automatically highlighted.

Question 3. Do you think planning can work in a changing environment?

Answer : Planning may not work in a changing environment. The environment consists
of a number of dimensions, economic, political, social, legal and technological
dimensions. The organisation has to constantly adapt itself to changes. It becomes
difficult to accurately assess future trends in the environment. Planning cannot foresee
everything and thus, there may be obstacles to effective planning.

Question 4. If planning involves working out details for the future, why does it not
ensure success?

Answer : Planning does not guarantee success. The success of an enterprise IS
possible only when plans are properly drawn up and Implemented. Any plan needs to
be translated into action or It becomes meaningless. Managers have a tendency to rely
on previously tried and tested successful plans It is not always true that Just because a
plan has worked before It Will work again. This kind of false sense of secunty may
actually lead to failure Instead of success

Question 5. Why are rules considered to be plans?

Answer : Rules are specific statements that inform what is to be done. They do not
allow for any flexibility or discretion. It reflects a managerial oecrsion that a certain
action must or must not be taken. They are usually the Simplest type of plans because
there IS no compromise or change unless a policy decision is taken.

Question 6. What kind of strategic decisions are taken by business organisations?

Answer : Major strategic decisions include whether the organisation Will continue to be
in the same line of business or combine new lines of activuy With the existing business
or seek to acquire a dominant position In the same market

Long Answer Type Questions

Question 1. Why is it that organisations are not always able to accomplish all their
objectives?

Answer : Organisations are not always able to accomplish all their Oblectlves due to
the fo OWing reasons

1. Planning Leads to Rigidity In an organisation a wen defined plan is drawn up
With specific goals to be achieved, with in a specific time frame. These plans then
decide how the work will progress In the future and managers may not be in a
position to change It. This creates a problem as flexibility is very important. Always
adhering to the plan may not give us the desired results always

2. Planning May not Work in a Dynamic Environment The business environment
is dynamic, nothing is constant. The business environment is a totality of external
forces, where In some changes or the other keep on taking place Plans decide in
advance what has to be done in future Planning cannot foresee everything and
thus there may be obstacles to effective planning.

3. Planning Reduces Creativity Planning is generally done by top management.
Usually the rest of the members just implements these plans. As a consequence,
middle management and other decisions makers are neither allowed to deviate
from plans nor are permitted to act on their own, thus planning in a way reduces
creativity since people tend to think along the same lines as others, there is
nothing new or innovative.

4. Planning Involves Huge Cost Planning involves huge cost in their formulation.
These may be in terms of time and money. The Costs incurred sometimes may
not justify the benefits derived from plans.

5. Planning is a Time Consuming Process Sometimes plans to drawn take up so
much of time that there is not much time left for their implementation and the
objectives to be achieved.

6. Planning does not Guarantee Success Any plans needs to translated into
action or it becomes meaningless. Managers have tendency to rely on previously
tried and tested successful plans. It not always true just because a plan has
worked before it will work again.

Question 2. What are the main features to be considered by management while
planning?

Answer : The main features to be considered by the management whil planning are

1. It Focuses on Achieving Objectives Planning is purposeful. Planning has no
meaning unless it contributes to the achievement predetermined organisational
goals.

2. It is the Primary Function Planning lays down the base for other functions of
management. All other managerial functions are performed within the framework
of the plans drawn. Thus, planning precedes other function.

3. Planning is Pervasive Planning is required at all levels of management as well
as in all departments of the organisations. The top management undertakes
planning for the organisation as a whole. Middle management does the
departmental planning. At the lowest level, day-to-day operational planning is
done by supervisors.

4. Planning is Continuous Plans are prepared for a specific period of time, may be
for a month, a quarter or a year. At the end of that period, there is need for a new
plan to be drawn on the basis of new requirements and future conditions. Hence,
planning is a continuous process.

5. Planning is Futuristic The purpose of planning is to meet future events
effectively to the best advantage of an organisation. It implies peeping into the
future, analysing it and predicting it.

6. Planning Involves Decision Making Planning essentially involves choice from
among various alternatives and activities. If there is only one possible goal then
there is no need for planning. The need only arises when alternatives are
available. Planning thus, involves

7. Planning is a Mental Exercise Planning is basically an intellectual activity of
thinking rather than doing, because planning determines the action to be taken.
Planning requires logical and systematic thinking rather than guesswork or wishful
thinking.

Question 3. What are the steps taken by management in the planning process?

Answer : The planning process involves the following steps

1. Establishing Objectives The first step in planning is to determine objectives
which must be realistic, specific and clear so as to specify what is to be
accomplished by the network of policies, procedures, strategies etc.

2. Developing Premises They include assumptions or forecasts of the future and
unknown conditions that will affect the operations of the plans. They provide an
idea about the future which facilitates the work of planning.

3. Identifying the Alternative Courses of Action The next step in planning is to
identify the various alternatives available to achieve the objectives.

4. Evaluating Alternative Courses The merits and demerits of different courses of
actions are evaluated in the light of objectives to be achieved and their feasibility
is judged i.e., how far they will be successful in helping to achieve the objective.

5. Selecting an Alternative The next step is to find out the most suitable course to
be followed. The efforts are directed towards selecting that course. Which
increases efficiency in the organisation by maximising output and profits at the
minimum costs.

6. Implement the Plan At this step the best alternative chosen is put to use.
7. Follow Up Only putting the best alternative to action is not enough. The future is

uncertain and dynamic. Therefore, it becomes important to check back whether
the plan is giving results or not.

Question 4. Is planning actually worth the huge costs involved? Explain.

Answer : Planning involves huge cost, when plans are drawn up huge costs are
involved in their formulation. These are in terms of time, money, effort etc. Detailed
plans require scientific calculations to ascertain facts and figures. The costs incurred
sometimes may not justify the benefits derived from the plans. There are a number of
incidental costs as well (which are indirect) like expenditures on organising a meeting,
consultation fees given to professional experts, market survey etc. But despite the high
cost no firm can work without proper planning if used properly.

Case Problem

An auto company C Ltd is facing a problem of declining market share due to increased
competition from other new and existing players in the maket. Its competitiors are
introducing lower priced models for mass consumers who are price sensitive. For
quality conscious consumers, the company is

Question 1. Prepare a model business plan for C Ltd to meet the existing challenge.
You need to be very specific about quantitative parameters. You may specify which type
of plan you are preparing.

Answer : In such a situation, formulating a strategy would be advisable.

A strategy is a Single use plan It is normally made to fight competition in the market.

The model business plan, i.e., strategy will be

1. It is objective and its purpose is that how much sales it wants to increase over a
specified time.

2. The company should then list down its strengths and weakness. This brings in
light as to what will be easy and what will be difficult.

3. Aggressive, advertising and sales promotion techniques to be adopted.

Question 2. Identify the limitations of such plans.

Answer : Umitations of the above strategy can be

1. Shortage of funds.
2. Shortage of technical professionals.
3. Top level may not be competent enough to develop a suitable strategy.
4. The company may not be successful in assessing the future plans of the

competitors as compared to its own strategy.

Question 3. How will you seek to remove these limitations?

Answer : The above limitations can be overcome by

1. Arranging funds in advance.
2. Effective methods of recruitment should be adopted to ensure availability of

effective staff in all departments.
3. Middle level should be encouraged to propose plans in the form of suggestions.

After considering all these, a strategy should be planned.
4. The company should be able to assess the moves of the competitors.